President Obama is in a dilemma
from which there appears to be no easy or early escape.

Democrats are the Party of
Government. They feed it, and it feeds them. The larger
government grows, the more agencies that are created,
the more bureaucrats who are hired, the more people who
become beneficiaries, the more deeply entrenched in
power the Party of Government becomes.

At the local, state and federal
level, there are 19 million to 20 million government
employees. And if one takes only Social Security,
Medicare, Medicaid, food stamps and earned income tax
credits, we are talking of scores of millions who depend
on government checks for the necessities of their daily
life.

These vast armies of voters—these
tens of millions of government employees and scores of
millions of government beneficiaries—are the big
battalions of the Party of Government. They provide
implacable resistance to any party that pledges to cut
or curtail government. For they are fighting for their
livelihood. And here is where Obama's dilemma arises.

The progressives thought that with
the takeover of both houses of Congress by veto-proof
Democratic majorities, and the election of the most
progressive of the candidates in the Democratic
primaries save Dennis Kucinich, a new Progressive Era
was at hand.

Another New Deal, another Great
Society. And early passage of a stimulus package of $787
billion, nearly 6 percent of the entire economy packed
into a single bill, seemed to confirm that happy days
were here again.

But, at the same time, the federal
takeover of AIG, General Motors and Chrysler and the
bailouts of Fannie, Freddie and the Wall Street banks
were igniting a Perot-style prairie fire that manifested
itself in Tea Party rallies in the spring and town-hall
protests in August.

Harry Reid and Nancy Pelosi
denounced these folks as
"evil-mongers"
engaged in the
"un-American" activity of shouting down Democrats—though, when
college radicals do it to conservatives, it is called
"heckling" and the conservatives are instructed that they
"just do not
understand the First Amendment."

Came November, Republican victories
in Virginia and New Jersey showed that the grass-roots
rebellion was real and broad-based. This was confirmed
by Scott Brown's astonishing upset in Massachusetts,
where a state Obama won by 26 points went Republican by
6 points, with Brown capturing a
Senate seat held by the Kennedy brothers since 1952.
Talk about a
fire bell in the night.

Obama's dilemma, evident in his
State of the Union, is that the progressives, who were
indispensable to his victories over Hillary,
now feel betrayed, especially with apparent
abandonment of
health insurance reform, while conservative
Democrats and independents, who were indispensable in
giving Obama his November victory, are angry and
alienated and disposed to vote Republican to stop what
they see as
America's plunge into socialism.

The non-negotiable demands of these
two essential elements of Obama's coalition are in
irreconcilable conflict. Obama tried to mollify both in
his address to Congress by emphasizing aspects of his
agenda that appeal to each. Thus the progressives were
promised an end to the
"Don't ask, don't tell" policy on
gays in
the military, while
Tea Party and
town-hall activists got a partial freeze on federal
spending and promises of
nuclear power, clean coal and offshore drilling.

Obama's problem: He can end up
satisfying no one and angering everyone. John McCain has
already denounced Obama's call for open
homosexuality in the military, a position that will
resonate with Middle America, while House Democrats are
appalled the Pentagon will be exempt from budget caps
imposed on social programs.

Arthur Laffer has pointed up the
burgeoning crisis Obama and the progressives confront.
Today, state, local and federal government spending
consumes 38 percent of the gross domestic product.
Federal spending alone is 27 percent.

"If you total what the government takes in the income tax, corporate
tax, Social Security taxes, capital gains taxes," says Laffer,"all of
that adds up to $2.2 trillion in tax receipts, and they
spent $3.5 trillion."

In 2009, we had a
deficit of $1.4 trillion, 10 percent of GDP. The
most conservative estimate for this year is a deficit of
$1.35 trillion, more than 9 percent of GDP.

Two questions.

With the public debt surging as a
share of GDP, and talk of a debt default by the United
States, how can Obama create or expand the social
programs as progressives demand? And with the deficit
running above 9 percent of GDP, how—even if the economy
starts to grow—can you close this without raising taxes
from 18 percent of GDP to 22 percent or 23 percent? That
would be an added tax hike of $560 billion to $700
billion—a year.

That kind of hit on the private
sector could kill a recovery, just as Herbert Hoover and
FDR did in the early 1930s.